Suspected Muslim militants took hostage at least six people, including a mother and her four children this morning, sparking a gun battle in the Indian state of Jammu and Kashmir, the scene of months of violent protests.

Television pictures from Jammu city showed a fierce exchange of fire in a residential suburb, with Indian soldiers battling the gunmen holed up inside a two-story house. Two militants are believed to have been shot dead.

Earlier the militants, wearing police uniforms, had opened fire on an army post killing a soldier. The armed men, say police, then escaped in a taxi and later shot its driver and two other civilians. They then rushed into a house and took a number of people hostage.

"The hostages include some women and children, and we are maintaining the highest degree of caution," Brigadier P Murli, an army spokesman, told Reuters news agency.

There have been allegations that the militants had cut a fence which straddles the de facto border between Indian and Pakistani portions of Kashmir today and slipped into Indian territory from Pakistan.

Separately in central Kashmir, two protesters were killed and more than a dozen injured when troops fired on protesters who police said defied a curfew and shouted pro-Independence slogans. The demonstrations are the biggest against Indian rule since a revolt broke out in 1989 ñ and have left at least 30 dead.

The protests, which have convulsed Indian Kashmir, have been sparked by a land row that has led to massive pro-independence demonstrations in the Muslim-majority Kashmir Valley and strikes in the Jammu region that lies at the foothills of the Himalayas.

For the first time Hindus in Jammu and Muslims in Kashmir have found themselves at loggerheads over the issue of the transfer of 100 acres of land to a Hindu Himalayan shrine. The polarized atmosphere has seen polls showing 40% of people in Hindu-majority Jammu think Muslim-majority Kashmir valley should leave the Indian Union.

In recent weeks, tensions over Kashmir have threatened relations between nuclear-armed neighbours India and Pakistan. India and Pakistan both claim the region in full but rule in parts. The two countries have fought two wars since 1947 over the territory, but since 2004 have engaged in a slow but broad peace process.

India claims that Pakistan has repeatedly broken a ceasefire between the de facto border in the Himalayan region and lodged an official protest with Islamabad yesterday for helping militants to infiltrate into India. Pakistan denies the claims and instead has set up a parliamentary body to record violations of human rights in Kashmir.